Navidar Review of salesforce.com’s Acquisition of ExactTarget
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Navidar Review of salesforce.com’s Acquisition of ExactTarget

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Key Questions We Examine in salesforce.com’s (CRM) Acquisition of ExactTarget (ET) ...

Key Questions We Examine in salesforce.com’s (CRM) Acquisition of ExactTarget (ET)

Navidar Has Fielded a Number of Calls Regarding This Transaction. As a Result, We Have Compiled an Analysis to Address the Two Most Common Questions

How Does ExactTarget’s Acquisition Price Compare to Other SaaS Software Transactions?

Why Was the Transaction Structured As a Tender Offer, Which Is Less Common Than a Merger?

ExactTarget Is a Great Indiana Success Story

ExactTarget Successfully Capitalized On the Opportunities of Being a Startup in Indiana, Deploying Venture Capital, Going Public, Completing a Follow-On Offering, and Ultimately Exiting to the World’s Largest SaaS Company

Beyond Creating Significant Wealth For Its Investors, ExactTarget Had $300M in Option Gains For 1,700 employees, 1,000 of Which Are Located in Indiana

ExactTarget Will Continue to Spawn Future Entrepreneurs Further Accelerating Indiana’s Innovation Momentum

ExactTarget Is a Blueprint For Other Indiana-Based Startups

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Navidar Review of salesforce.com’s Acquisition of ExactTarget Navidar Review of salesforce.com’s Acquisition of ExactTarget Presentation Transcript

  • Review of salesforce.com’s Acquisition of: July 2013
  • Disclaimer This Presentation (the “Presentation”) has been prepared solely for informational purposes and may not be used or relied upon for any purpose. Navidar Group LLC (“Navidar”) did not advise either party in this transaction. All projections are based on public sources, Equity Research and Navidar Investment Banking estimates, and are not from either salesforce.com or ExactTarget’s Management. This Presentation is not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. This Presentation does not constitute an offer, or the solicitation of an offer, to buy or sell any securities or other financial product, to participate in any transaction or to provide any investment banking or other services, and should not be deemed to be a commitment or undertaking of any kind on the part of Navidar or any of its affiliates to underwrite, place or purchase any securities or to provide any debt or equity financing or to participate in any transaction, or a recommendation to buy or sell any securities, to make any investment or to participate in any transaction or trading strategy. Although the information contained in this Presentation has been obtained or compiled from sources deemed reliable, neither Navidar nor any of its affiliates make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein is, or shall be relied upon as, a promise or representation whether as to the past, present or future performance. The information set forth herein may include estimates and/or involve significant elements of subjective judgment and analysis. No representations are made as to the accuracy of such estimates or that all assumptions relating to such estimates have been considered or stated or that such estimates will be realized. The information contained herein does not purport to contain all of the information that may be required to evaluate a participation in any transaction and any recipient hereof should conduct its own independent analysis of the data referred to herein. We assume no obligation to update or otherwise revise these materials. Navidar and its affiliates do not provide legal, tax or accounting advice. Prior to making any investment or participating in any transaction, you should consult, to the extent necessary, your own independent legal, tax, accounting and other professional advisors to ensure that any transaction or investment is suitable for you in the light of your financial capacity and objectives. 2
  • ExactTarget Is a Great Indiana Success Story  ExactTarget Successfully Capitalized On the Opportunities of Being a Startup in Indiana, Deploying Venture Capital, Going Public, Completing a Follow-On Offering, and Ultimately Exiting to the World’s Largest SaaS Company  Beyond Creating Significant Wealth For Its Investors, ExactTarget Had $300M in Option Gains For 1,700 employees, 1,000 of Which Are Located in Indiana  ExactTarget Will Continue to Spawn Future Entrepreneurs Further Accelerating Indiana’s Innovation Momentum  ExactTarget Is a Blueprint For Other Indiana-Based Startups 3
  • Key Questions We Examine in salesforce.com’s (CRM) Acquisition of ExactTarget (ET) Navidar Has Fielded a Number of Calls Regarding This Transaction. As a Result, We Have Compiled an Analysis to Address the Two Most Common Questions  How Does ExactTarget’s Acquisition Price Compare to Other SaaS Software Transactions?  Why Was the Transaction Structured As a Tender Offer, Which Is Less Common Than a Merger? 1 2 4
  • Review of the Transaction and Valuation 5
  • Review of the Transaction Note: Balance sheet data as of 3/31/13. Estimates based on an average of select Equity Research Analyst projections. (1) Equity Value based on diluted shares outstanding under Treasury Stock Method. (2) LTM = Last Twelve Months. (3) 1-trading day premium based on closing price of $22.10, 15-trading day premium based on closing price of $20.97, and 30-trading day premium based on closing price of $19.86.  Expands growth and capability in interactive and email marketing, and marketing automation  Accelerates the growth and leadership of the CRM Marketing Cloud  CRM brings together a complete suite of services; as opposed to point products  Increase value proposition for customers of both companies  Allows CRM clients to extend their investments in marketing automation and deliver marketing platform of choice for CMOs  Allows ExactTarget’s customers to leverage CRM’s leading sales, service and platform solutions to transform their end-to-end customer experience Transaction Summary Transaction Strategic Rationale Valuation Highlights $ in millions, except per share data Offer Share Price ($) $33.75 FD Shares Outstanding(1) 77.5 Equity Value $2,615.4 Net Debt (Cash) ($101.0) Total Enterprise Value $2,514.4 LTM(2) CY'13E CY'14E Revenue $317.1 $379.0 $458.7 EV/ Revenue 7.9x 6.6x 5.5x Offer Premium(3) Offer Price ($ ) 1-Day 15-Day 30-Day $33.75 52.7% 60.9% 69.9% 6
  • Equity Research Analysts Are Generally Bullish on the Acquisition, Some Voice Concerns Bright Spots “Reasonable valuation, higher bid unlikely, in our view. Salesforce.com's (CRM) offer to acquire ET is not surprising to us given CEO Marc Benioff's previously publicly announced intent to further build out his company's marketing cloud inorganically. Based on our estimates, the purchase price implies a 5.2x 2014E EV/Revenue (versus the SaaS peer group at 4.4x), which we view as a reasonable price for a market leading subscription software vendor growing organically ~20% yr/yr. Because CRM management said that the bidding process was competitive, we do not believe a higher bid will emerge.” Credit Suisse – Phillip Winslow – 06/05/13 “We consider the acquisition an excellent outcome for ExactTarget and its customers, as the company ends its independent public life in a truly logical home.” Roth Capital Partners – Nathan Schneiderman – 06/04/13 “We like the potential synergies of ExactTarget and believe the acquisition will ultimately accelerate CRM's organic growth, add scale to the marketing business, while driving demand for the segment.” Oppenheimer – Brian Schwartz – 06/04/13 “While the Street views Email Marketing as a commodity-like market unworthy of their investment, we firmly believe that real potential exists to transform the ultra-fragmented Marketing segment into a big opportunity by congealing several of the "fragments" into a cohesive whole.” Piper Jaffray – Mark Murphy – 06/04/13 “Filling out the Marketing Cloud with marketing automation and campaign management tools from ExactTarget helps complete the functionality roadmap for a complete marketing solution, and over the longer-term, we believe this deal could position CRM as a clear leader in the emerging cloud-based marketing market.” Evercore Partners – Kirk Materne – 06/04/13 Potential Concerns “While we expect SFDC’s superior distribution capabilities to drive better growth than ET could have done on its own, we also expect the combined entity to continue to lose money for the next six quarters.” Cowen & Company – Peter Goldmacher – 06/04/13 “We’re mixed on the deal. While ET and its peers are still posting solid 20%-plus growth rates, we have reservations about the email marketing space and our source have historically argued that CRM deemed it to be low on the value stack. Moreover, the deal will obfuscate CRM’s true organic revenue and billings growth rates (a sensitive issue given CRM’s recent print) and the non-GAAP EPS dilution was more than we were expecting.” BMO Capital Markets – Karl Kierstead – 06/04/13 “Although we view ET as a leader in B2C marketing automation, we think much of its core email marketing business is fairly heavily commoditized, and we are not sanguine about its long-term operating margin potential.” Wedbush Securities – Steve Koenig – 06/04/13 Source: Equity Research. 7
  • ET Has Consistently Outperformed Its Peers… 45.5% 30.4% 28.4% 26.2% 0.0% 12.0% 24.0% 36.0% 48.0% ET Marketing SaaS Universe SaaS Universe Responsys 41.9% 33.1% 29.5% 17.5% 0.0% 9.0% 18.0% 27.0% 36.0% 45.0% ET Marketing SaaS Universe SaaS Universe Responsys 35.4% 33.5% 28.5% 19.6% 0.0% 10.0% 20.0% 30.0% 40.0% ET Marketing SaaS Universe SaaS Universe Responsys 41.6% 32.6% 31.0% 19.9% 0.0% 9.0% 18.0% 27.0% 36.0% 45.0% ET Marketing SaaS Universe SaaS Universe Responsys 38.8% 31.9% 30.5% 27.5% 0.0% 7.0% 14.0% 21.0% 28.0% 35.0% 42.0% ET Marketing SaaS Universe SaaS Universe Responsys Q1’2013 Year-over-Year Revenue Growth % Q4’2012 Year-over-Year Revenue Growth % Q3’2012 Year-over-Year Revenue Growth % Q2’2012 Year-over-Year Revenue Growth % Q1’2012 Year-over-Year Revenue Growth % Source: S&P CapitalIQ. (1) Marketing comparables include: ConstantContact, Demandware, Marketo, Responsys , salesforce.com, and Vocus. (2) SaaS comparables include: Blackbaud, Concur Technologies, Constant Contact, Cornerstone OnDemand, Demandware, inContact, Interactive Intelligence, j2 Global, Jive Software, Marketo, NetSuite, Responsys, salesforce.com, ServiceSource International, SPS Commerce, Synchronoss Technologies, Vocus, and Workday. 8 (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
  • …and Has Consistently Exceeded Equity Research Analyst Expectations… Actual vs. Expected Quarterly Revenue $59 $65 $72 $79 $88 $64 $69 $75 $84 $89 $55 $60 $65 $70 $75 $80 $85 $90 $95 Q1'2012 Q2'2012 Q3'2012 Q4'2012 Q1'2013 ExactTarget-Consenus Estimates ExactTarget-Actuals 6.1% 3.8% 6.3% 1.6% QuarterlyRevenue($M) 8.5% Source: S&P CapitalIQ and Equity Research. Note: Text boxes indicate percentage change in ET’s actual quarterly revenue versus its consensus estimates. 9
  • …However, Compared to Its Closing Share Price On Its First Day of Trading, ET Has Underperformed the Overall Market… ET Share Price Performance Since IPO Source: S&P CapitalIQ. (1) SaaS Universe includes: Blackbaud, Concur Technologies, Constant Contact, Cornerstone OnDemand, Demandware, inContact, Interactive Intelligence, j2 Global, Jive Software, Marketo, NetSuite, Responsys, salesforce.com, ServiceSource International, SPS Commerce, Synchronoss Technologies, Vocus, and Workday. (2) Relative indexing based on ET IPO price of $19.00. For ET, 100% = $19.00. 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% 130.0% 140.0% 150.0% Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 IPO $19.00 Close on IPO $25.11 1-Day Pre-Offer $22.10 Offer $33.75 ExactTarget (IPO Price of $19.00) 16.3% RelativeSharePricePerformanceSince3/21/2012/ETIPODate 16.4% 14.9% SAAS Universe(1) NYSE (12.0%) ExactTarget (Closing Price on First Day of Trading of $25.11) 10
  • …Largely in Part to Being Dragged Down by Responsys’ Weak Guidance But More Recently by Its Own Guidance ET Share Price Performance Since IPO Source: S&P CapitalIQ. (1) Relative indexing based on ET IPO price of $19.00. For ET, 100% = $19.00. 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% 130.0% 140.0% 150.0% Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 RelativeSharePricePerformanceSince3/21/2012/ETIPODate ExactTarget (IPO Price of $19.00) 16.3% (12.0%) (19.2%) ExactTarget (Closing Price on First Day of Trading of $25.11) Responsys 09/18/2012: ET IPO Lockup Expiration: ET’s stock price falls 7.2% after insiders release 7.5 million additional shares to the market. 05/09/2013: ET Guides Down on EPS Due to a Reduction in Expected Operating Margin: Weak Q2 EPS guidance of $(0.10)-$(0.12) versus Street estimates of $(0.08). 11/05/2012: Responsys Guides Down on EPS and Revenue Citing Segment Pricing Pressures: Weak Q4 revenue guidance of $42-43M below consensus of $45M, and EPS guidance of $0.05 versus consensus of $0.07. 11
  • The Premium Offered When Compared to the Stock Price at Different Points Varies Significantly Offer Price Premium to ET Stock Price at Various Points in Time Source: S&P CapitalIQ. (1) 52-Week Low on Dec. 11, 2012 of $18.00. (2) IPO Price of $19.00. (3) 30 Trading-Day Premium Based on April 22, 2013, Closing Price of $19.86. (4) 52-Week High on Sept. 17, 2012 of $24.87. (5) Closing Price on 1st day of Trading of $25.11. (6) All-time High Pre-offer Based on March, 27, 2012 Closing Price of $27.35. 87.5% 77.6% 69.9% 35.7% 34.4% 23.4% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 52-Week Low IPO Price 30-Day Premium 52-Week High Closing Price on 1st Day of Trading All-time High Pre-offer Premium% 52.7% 1- Day Premium to ET Stock Price (1) (2) (3) (4) (5) (6) 12
  • Comparing the Value ET Received For Its Shares Historical Trading Ranges: 52 Week Low ( Dec. 11, 2012) 52 Week High (Sept. 17, 2012) Equity Research Analysts’ 1-year Price Target Range: Average: $31.64 Comparable Acquisition Analysis – SaaS EV/NTM Revenue: Multiple: 5.5x-7.0x NTM Revenue Comparable Company Trading Analysis – SaaS EV/2013E Revenue: Multiple: 3.6x-5.6x 2013E Revenue DCF Analysis – Equity Research Analyst Projection Case: 5-Year Revenue CAGR: 17.0% 5-Year EBITDA Margin Expansion: 1,300bps 11.0%- 13.0% WACC 3.5x-4.5x EV/NTM Revenue Exit Multiple DCF Analysis – High-Growth and Margin Expansion Case: 5-Year Revenue CAGR: 22% 5-Year EBITDA Margin Expansion: 2,465bps 11.0%- 13.0% WACC 3.5x-4.5x EV/NTM Revenue Exit Multiple $33.75 Offer priceClosing Share Price on First-Day of Trading $25.11 $18.00 $28.00 $31.55 $21.15 $24.43 $24.87 $34.75 $32.09 $34.25 $28.52 $39.00 $40.45 Methodology Implied Share Price Projection Source: S&P CapitalIQ, Equity Research and Navidar Investment Banking estimates. 13
  • Comparable Acquisition Analysis The Enterprise Valuation Multiple Is 6.3x Compared to the Average of 7.6x and the Median of 6.7x For Comparable Deals Valuation Metrics Premiums Paid Date Target Acquirer Enterprise Value ($USDmm) EV/NTM Revenues NTM Rev. Growth(1) 1-Day Premium 1-Week Premium 1-Month Premium 6/3/2013 ExactTarget salesforce.com $2,615 53% 47% 58% SaaS Acquisition Comparables 11/23/2012 Eloqua Oracle $872 8.1x 20% 31% 33% 34% 8/25/2012 Kenexa IBM $1,307 3.3x 24% 42% 38% 87% 5/31/2012 Buddy Media salesforce.com $745 19.7x 32% NA NA NA 5/22/2012 Ariba SAP $4,411 7.8x 13% 20% 19% 26% 2/8/2012 Taleo Oracle $1,805 4.9x 16% 18% 24% 24% 12/2/2011 SuccessFactors SAP $3,516 8.7x 38% 52% 77% 47% 10/23/2011 Rightnow Oracle $1,521 6.2x 13% 20% 10% 38% 6/30/2011 Blackboard Sponsor Group $1,767 3.2x 15% 4% 2% 7% 12/21/2010 Aprimo Teradata $500 6.7x 10% NA NA NA Average 27% 29% 37% Median 20% 24% 34% 20%6.3x 7.6x 6.7x 20% 16% Source: S&P CapitalIQ for comparables. ExactTarget projections based on average of select Equity Research Analyst Projections. (1): NTM is defined as next twelve months, or the four quarters ending 3/31/14 for ET. For the comparables NTM is based on the four quarters post-acquisition. 14
  • Comparable Company Trading Analysis Based on Its Revenue Growth, ExactTarget Appeared to Be Undervalued Relative to Comparable Companies Valuation Metrics 2013E 2014E 2013E 2014E ExactTarget @ 1-Day Prior to Acquisition $22.10 $1,531.0 ($101.0) $1,430.0 3.8x 3.1x 20.7% ExactTarget @ Acquisition Price $33.75 $2,615.4 ($101.0) $2,514.4 6.6x 5.5x 29.7% 20.7% SaaS Marketing Constant Contact $16.14 $495.7 ($97.3) $398.3 1.4x 1.2x 13.4% 11.5% Demandware $32.87 $991.5 ($102.1) $889.3 9.0x 6.7x 24.7% 34.4% inContact $7.70 $410.9 ($40.9) $370.0 2.7x 2.3x 23.5% 18.8% Responsys $11.51 $568.2 ($105.4) $462.8 2.4x 2.1x 17.9% 16.5% Marketo $19.94 $713.5 ($32.5) $681.0 9.1x 7.1x 28.0% NA salesforce.com $39.61 $23,367.3 ($405.5) $22,961.9 5.9x 4.7x 27.7% 25.7% Vocus $9.25 $195.1 ($40.1) $232.5 1.2x 1.1x 10.3% 10.5% Average 4.5x 3.6x 20.8% 19.6% Median 2.7x 2.3x 23.5% 17.7% SaaS Others Blackbaud $30.77 $1,404.5 $203.7 $1,608.1 3.2x 3.0x 12.0% 8.5% Concur Technologies $80.92 $4,517.8 ($208.3) $4,309.6 7.5x 6.1x 24.2% 23.2% Cornerstone OnDemand $40.96 $2,090.3 ($69.3) $2,021.0 11.1x 7.8x 54.4% 41.7% Interactive Intelligence Group $51.71 $1,028.9 ($68.7) $960.2 3.2x 2.7x 25.7% 18.5% j2 Global $41.34 $1,898.8 ($48.7) $1,849.5 3.6x 3.4x 40.1% 4.5% Jive Software $17.40 $1,159.5 ($133.6) $1,025.9 6.8x 5.3x 32.1% 29.3% NetSuite $87.90 $6,485.4 ($176.7) $6,308.8 15.5x 12.1x 32.0% 27.5% ServiceSource International $8.28 $636.1 ($116.8) $519.3 1.9x 1.7x 10.2% 14.4% SPS Commerce $53.67 $805.8 ($72.6) $733.2 7.3x 6.1x 30.0% 19.2% Synchronoss Technologies $31.27 $1,200.0 ($57.2) $1,142.8 3.3x 2.8x 25.5% 20.5% Workday $65.46 $11,324.6 ($784.4) $10,540.2 24.0x 15.9x 60.4% 50.9% Average 6.3x 5.1x 28.6% 20.7% Median 5.2x 4.3x 27.8% 19.9% ($Millions, except per share values) Operating Metrics Stock Price Equity Value Net Debt Ent. Value EV/Revenue Revenue Growth 29.7% 20.7% Source: S&P CapitalIQ for comparables. ExactTarget projections based on average of select Equity Research Analyst Projections. Note: Market data for comparable companies as of June 10, 2013. 15
  • Offer Price Appears to Give ET Credit On a Forward Basis Transaction Price As a % of Potential Share Price at 12/31/14 ET at IPO $33.75 $33.75 $33.75 $30.65 $39.21 $47.77 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 5.0X 6.5X 8.0X Transaction Price Per Share 12/31/14 Potential Price Per Share ExactTargetPriceperShare 110% 86% 71% ET at All-Time High ET at 1-Day Pre-Deal  Stock Price $19.00  EV/LTM Rev. 5.7x  LTM Rev. Growth 55%  Stock Price $27.35  EV/LTM Rev. 8.3x  LTM Rev. Growth 55%  Stock Price $22.10  EV/LTM Rev. 4.5x  LTM Rev. Growth 39% (1) Price per share at 12/31/14 calculated using expected 2014 revenue of $459 million, which is based on an average of select Equity Research Analyst estimates. In order to calculate price per share from Enterprise Value, an estimate of $73 million as of 12/31/2014 was used for cash, and shares were based on 69.277 million basic shares and 11.121 in-the-money options with a weighted average exercise prices of $8.82 using the treasury stock dilutive share calculation. Note this analysis has not discounted the future price to today’s date. EV/ LTM at 12/31/14(1) 16 ET Would Have to Accelerate Its Already High Revenue Growth Rate Over the Next 18-Months in Order to Expand Its Valuation Multiple to a Level That Made It Worth Remaining Independent. Therefore, the Tender Price Looks Attractive.
  • Structuring Considerations 17
  • Review of Structure in ExactTarget Transaction On June 03, 2013 salesforce.com entered into an acquisition agreement through its wholly owned subsidiary, Excalibur Acquisition Corp., to acquire ExactTarget A cash tender offer commenced on June 12, 2013 to purchase all of the outstanding ExactTarget common shares, at a price per share of $33.75  Tender offer expires July 10, 2013  Salesforce.com plans to consummate the merger under the “short form” merger procedures of Section 253 of the DGCL (Delaware General Corporation Law)  ExactTarget has granted an option to salesforce.com to issue authorized shares that will help salesforce.com acquire 90% of the shares then outstanding in order to facilitate completion of the merger  In order to induce the merger, certain shareholder’s of ExactTarget (accounting for 20% of the shares outstanding), have entered into an agreement to tender their shares to the acquirer and if required vote their shares in favor of the acquisition  If salesforce.com does not have sufficient shares to consummate the merger under the “short form” merger procedure then ExactTarget will convene a meeting of stockholders to vote on the merger Following the successful completion of the tender offer, ExactTarget shares not tendered in the tender offer will be converted in a second step merger into the right to receive the same $33.75 per share in cash paid in the tender offer Following the completion of the offer, Excalibur Acquisition Corp will be merged with and into ExactTarget and ExactTarget will become a wholly owned subsidiary of Salesforce.com  The transaction is expected to be completed in salesforce.com’s second fiscal quarter of 2014, ending July 31, 2013 3 4 1 2 Source: Company Filings. 18
  • Tenders Offers Could Be More Common in the Future  Tender Offers Are a Less Common Acquisition Structure and Represented Only 14% of Total Public Company M&A in Q1’13  Tender Offers Do Not Require a Shareholder Meeting or Board Approval and Are Able to Be Completed Relatively Quickly  Mergers Are Preferable As They Allow Acquirers to Obtain 100% Ownership in a Single Step  Tender Offers May Become More Common in the Future  Delaware decision on top-ups that will provide more certainty that a top-up will work to provide a bidder with total ownership of a target upon the successful completion of the tender offer  Provides flexibility for repeated extensions of the offer to fulfill the condition requiring a majority of shares tendering  Provides greater flexibility at the end-stage of a deal over a merger  Recently Proposed Amendment That May Enhance the Appeal of the Tender Offer Over a One-step Merger  New provision will provide a means to avoid the need to circulate a Schedule 14C Information Statement and hold a stockholder vote should the tender offer fall short of reaching the 90% threshold specified in DGCL Section 253  Proposed amendment to streamline the acquisition process would be available on an “opt-in” basis to target companies whose shares are either listed on a national securities exchange or held of record by more than 2,000 holders 19
  • U.S. Tender Offers vs. U.S. Public M&A – Since 2010(1) U.S. Majority Stake Tender Offers As a % of Total U.S. Public Company M&A Source: S&P CapitalIQ. Note: Q2’13 consists of data through June 10, 2013. Note: M&A Deals only includes deals where the Target Companies are publicly listed. 20.5% 20.3% 27.6% 25.8% 16.7% 27.9% 14.3% 28.3% 24.6% 32.7% 32.0% 16.1% 7.4% 13.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 U.S.MajorityStakeTenderOffersAsa%ofTotalU.S.PublicM&A 20
  • Large Public Software M&A Deals – Since 2010 Date Buyers Target Transaction Value (M) EV/Rev. (x) EV/EBITDA (x) Tender Offer Merger 6/4/2013 salesforce.com ExactTarget $2,628 7.9x NA  5/20/2013 Vista Equity Partners Websense $1,050 2.7x 17.8x  5/8/2013 Trulia Market Leader $336 6.6x NA  12/20/2012 Oracle Eloqua $956 9.7x NA  12/17/2012 Elliott Management Compuware $2,257 2.4x 15.1x  11/28/2012 NCR Retalix $747 2.3x 25.5x  10/29/2012 Riverbed Technology OPNET Technologies $994 5.0x 26.7x  8/27/2012 IBM Kenexa $1,397 4.1x 49.0x  5/22/2012 SAP America Ariba $4,608 8.8x 108.0x  5/1/2012 OpenText EasyLink Services $332 1.7x 7.3x  2/9/2012 Oracle Taleo $1,921 5.7x 60.9x  1/27/2012 BMC Software Numara Software $306 NA NA  1/17/2012 Blackbaud Convio $326 3.4x 35.5x  12/8/2011 IBM DemandTec $486 4.8x NA  12/3/2011 SAP America SuccessFactors $3,764 12.1x NA  Source: S&P CapitalIQ. 21
  • Large Public Software M&A Deals – Since 2010 (Cont.) Source: S&P CapitalIQ. Date Buyers Target Transaction Value (M) EV/Rev. (x) EV/EBITDA (x) Tender Offer Merger 10/24/2011 Oracle Rightnow Technologies $1,763 7.0x 63.8x  10/11/2011 NeuStar Targus Information $658 4.4x 11.7x  8/24/2011 CVC Capital Partners Raet B.V. $576 3.0x NA  7/1/2011 Providence Equity Partners Blackboard $1,852 3.7x 22.3x  3/28/2011 eBay GSI Commerce $2,381 1.6x 20.5x  2/1/2011 Time Warner Cable NaviSite $332 2.5x 12.3x  11/2/2010 Oracle Art Technology Group $1,033 4.5x 32.1x  8/13/2010 IBM Unica $490 4.1x 44.3x  8/3/2010 GI Partners SoftLayer Technologies $475 NA NA  7/26/2010 Roper Industries iTradeNetwork $523 NA NA  5/24/2010 IBM Sterling Commerce $1,400 NA NA  3/15/2010 Pegasystems Chordiant Software $157 1.4x NA  3/10/2010 CA Technologies Nimsoft $353 NA NA  2/12/2010 Sponsor Group SSI Investments $1,206 3.6x 9.7x  04/03/2009 Vista Equity Partners SumTotal Systems $134 0.9x 36.8x  22
  • Two Basic Ways to Structure a Public Company Acquisition Common Structure  One-Step Merger in which target shareholders vote to approve transaction  Required vote is typically majority of outstanding shares  If approved, shareholders receive cash, stock, or a combination upon consummation of the merger  Two-Step Merger in which acquirer first buys target stock in tender offer, then does statutory “ squeeze-out” merger  Purchase enough shares to guarantee the required vote for the second-step merger  If acquirer gets 90% of shares it may squeeze out minority shareholders at same price in a short-form merger  Subsequent offering period, market purchases and top-up option help ExactTarget Structure 23
  • Comparison of Tender Vs. Merger Benefits of Tender Offer: Two-Step Vs. a One- Step Merger Benefits of One-Step Merger Vs. Tender Offer (Two-Step Merger)  No Pre-clearance: SEC pre-clearance of cash tender offer materials is not required  Speed: A cash tender offer can be completed relatively quickly – 20 business days in the case of a friendly deal not involving any regulatory issues  Direct: A tender offer is made directly to shareholders and does not require a shareholder meeting or board approval (so useful/necessary for a hostile takeover bid)  Freeze-out: A tender offer between parent/subsidiary can avoid entire-fairness heightened review so long as certain conditions (e.g., majority of minority) are met  100% Ownership: Get to 100% ownership in a single step, which may be important for financing the transaction  Possible Timing Advantage: If regulatory or other conditions delay closing tender offer for more than three to four months, the interloper risk can be eliminated (by securing shareholder approval) more quickly in a one-step merger than in a two-step tender offer  Flexibility in Structuring Consideration: Simpler to provide for cash-stock elections, collars, etc.  Flexibility to Buy Target Shares in the Market: Can buy target shares during deal pendency (subject to any applicable restrictions), which cannot in a tender offer 24
  • One Step Merger: Straight to the Merger Vote Source: Skadden, Arps, Slate, Meagher & Flom M&A structuring presentation. Buyer (B) T Shareholders B Former T Shareholders Consideration (Cash or B Stock) 1. B, T and S sign merger agreement 2. Boards recommend to shareholders Target (T) Sub (S) 3. (a) T shareholders vote for merger (b) B approves as sole shareholder of S (c) B shareholders get vote if >20% issued (NYSE) T 4. File Certificate of Merger and S merges into T Before After 25
  • Two Step: Tender Offer, Then Merge – ExactTarget Structure Step 1 Step 2 Source: Skadden, Arps, Slate, Meagher & Flom M&A structuring presentation. Buyer (B) Target (T) T Shareholders 6. (a) If S owns >90%, does short-form merger into T (b) If S owns <90%, S calls share-holder meeting, votes for merger and then merges into T Sub Buyer Target Shareholders Target 1. B, T and S sign merger agreement 2. S makes offer to buy T shares Sub (S) 3. T Board recommends T shareholders tender to S 4. T shareholders tender (satisfy minimum condition) 5. S accepts and pays for tendered shares Minority 26
  • Timing to Acquire a Public Company Source: Skadden, Arps, Slate, Meagher & Flom M&A structuring presentation. (1) Including after subsequent offering period and top-up option, if applicable. Exact Target Tender Offer/ Share Exchange Offer 100% Cash Short-form Merger Acquisition Completed Acquisition Completed Acquisition Completed Acquisition Completed Acquisition Completed Acquisition Completed Long-form Merger Short-form Merger Long-form Merger Part Cash/ Part Stock Post Proxy Post Proxy Merger (Any Form of Consideration) Timing Filing of Certificate of Merger >50% vote of all shareholders >50% vote of all shareholders Filing of Certificate of Merger ≥90%1 <90% (but more than 50%) ≥90%1 <90% (but more than 50%) >50% shareholder vote >50% shareholder vote SEC Review No SEC Review 4-8 weeks <40 business days 3-5 months 5-12 weeks 3-6 months 2-3 months (all cash) 3-4 months (part/all stock) 4-8 weeks 27